Keep HMO or go for High Deductible and HSA?

[buildmybudget]

Ok, so the company I work for was purchased(again!) and I now have to select my benefits for 2010. Unfortunately my benefits package as a whole is much worse under the new company and I have to now pay for supplemental life insurance for my wife and I along with ST/LT disability. We are both in our 20's and in good health, but I am very hesitant to change from our HMO to the HDHP/HSA.

The new HMO is 325.85/mth with out of pocket max $15k. The HDHP is $131/mth with $3k deductible and $10k out of pocket maximum. If I purchased the HDHP and put the difference (325.85-131) into the HSA I would wind up with about 2533.05 at the end of one year.

Do any of you use HSA's? It's an obvious benefit to use tax free money to pay for health expenses and to lower our total taxable income, but I feel like I'm going to wind up paying a significant price somewhere else. I must admit I like the convenience of the HMO overall.

Thoughts, reactions? Any help is much appreciated!

[disneysteve]

Go for the HSA plan. I would if I could. Unfortunately, I live in NJ where HSAs don't exist. Well, they do exist but they are worthless because they actually cost a lot more than HMO plans which defeats the purpose.

HSAs have a lot of benefits. You get to put money away into a tax-free account that can be used for health expenses including many things not typically covered by health insurance, like OTC meds, for example. The money in the account is yours no matter what happens. If it hasn't been spent on medical costs by the time you retire, it can be used for any purpose after age 65, so it works as a supplemental retirement account.

[safari]

In California, if you don't spend the money you put into HSA in that year, you lose the remaining balance. I never participate in it because of that reason. This year I spent no more than $50 on all health-related expenses.

[southerndoc]

Originally Posted by safari

In California, if you don't spend the money you put into HSA in that year, you lose the remaining balance. I never participate in it because of that reason. This year I spent no more than $50 on all health-related expenses.

I think you are confusing an HSA with an FSA. An FSA (Flexible Spending Account) is a "use it or lose it" type system under IRS regulations. Money in an HSA is yours to keep. It's regulated by the federal government and not by the states.

The problem with HSA's is the high fees that banks charge. I pay $4.95/mo for mine. The interest rate is 1.5% if I remember correctly. My HSA broker allows me to invest anything above $1,000 in various mutual funds. So far I've had a decent return on investments in my HSA.

Who knows if HSA's will be around when health insurance reform is enacted into law.

[creditcardfree]

How often do you go to the doctor? My husband and I go only once a year. We don't currently take prescriptions. Our kids are relatively healthy. My point is that, you may not even need to spend the amount you save if you are healthy.

We are military...so this isn't an option or necessary, but I think HSA's are great for those of us that are relatively healthy. You really only insuring for the worse case scenario.

[safari]

Originally Posted by southerndoc

I think you are confusing an HSA with an FSA. An FSA (Flexible Spending Account) is a "use it or lose it" type system under IRS regulations. Money in an HSA is yours to keep. It's regulated by the federal government and not by the states.

The problem with HSA's is the high fees that banks charge. I pay $4.95/mo for mine. The interest rate is 1.5% if I remember correctly. My HSA broker allows me to invest anything above $1,000 in various mutual funds. So far I've had a decent return on investments in my HSA.

Who knows if HSA's will be around when health insurance reform is enacted into law.

Thank you for correcting me. I was indeed talking about FSA.

[LivingAlmostLarge]

Going to get pregnant? Don't use a HDHP, you'll be paying the HDHP that year and probably the next. Maternity usually is better off with a HMO.

[disneysteve]

Originally Posted by LivingAlmostLarge

Going to get pregnant? Don't use a HDHP, you'll be paying the HDHP that year and probably the next. Maternity usually is better off with a HMO.

I'm not sure that's true here.

The new HMO is 325.85/mth with out of pocket max $15k. The HDHP is $131/mth with $3k deductible and $10k out of pocket maximum.

The HMO will cost OP $3910.20/year in premiums and a maximum OOP of $15,000. That's a worst-case cost of $18, 910.

The HDHP/HSA will cost $1,572/year in premiums and a maximum OOP of $10,000. That's a worst-case cost of $11,572, a potential savings of $7,338.

[buildmybudget]

Although the math here is correct, I think the hospital copayment is $500 and maternity is covered under the HMO.. I could be completely wrong though, I haven't had a child before! It's something we have to consider because we are thinking about kids in the next year or so...

[southerndoc]

With a high deductible plan, I pay $120/month for insurance that has no co-pay for in-network and 20% co-pay for out-of-network services with a $2600 deductible. My out of pocket expenses are capped at $5200. Preventive services are covered at 100% with no deductible. My HSA has had a 20% return this year on the mutual funds I'm invested in, but then again, that's unusual and just a reflection of the market.

The cost for equivalent coverage with a $500 deductible was $280/month.

So for my case, the HSA works out well. Neither program has prescription coverage because I'm an independent contractor, and it's rare to find prescription coverage under non-employer based policies.

[LivingAlmostLarge]

DS, HDHP usually have separate maternity riders to boot, no pregnancy for the first year and they stuff gets segregated out. I have friends with HDHPs and hate it for maternity. Otherwise it's great.

[MonkeyMama]

Maternity - it just depends on the plan. Though good comment to be extra careful.

I think HSAs are great if you are overall healthy, & you are good at saving money.

Our private plan topped out at about $850/month. I forget what the out-of-pocket was, but there was co-pays and an out-of-pocket max, in addition.

The first couple of years our insurer offered HDHPs, they weren't very good. Then, last year, they offered about $500/month with $3k deductible and out-of-pockets. Basically, they can't charge us more than the insurance and the deductible. I researched everything really carefully, and jumped on it. I LOVE it. We've been on it almost 22 months. We maybe used $1k of our deductible last year, and so saved about $2k in the end. This year is not over, but I'd be surprised if we used $200. Preventative stuff tends to be no-charge. So we don't get charged for regular checkups, etc., which we do keep up with.

We actually have not used the HSA, because our medical expenses are so high (compared to our income) that they are already tax deductible. Safari may have been confused, but HSAs can be a PITA in California because they state does not recognize them. Though Federally they are treated a bit like IRAs, in California they are not deductible and the earnings are not tax-deferred. The record keeping becomes a nightmare. This is another reason I have not opened one, though in the future we probably will. Even though we haven't seen the HSA benefit, I still think our HDHP is worth it.

We did give up prescription too, but the coverage was never good to begin with (privately).

[disneysteve]

Originally Posted by LivingAlmostLarge

DS, HDHP usually have separate maternity riders to boot, no pregnancy for the first year and they stuff gets segregated out. I have friends with HDHPs and hate it for maternity. Otherwise it's great.

Thanks for the info. I didn't know that.

[Scanner]

I agree with DisneySteve but my reason is more philosophical.

I think we need to get away from this mentality of "Let someone else pay for healthcare" (the HMO) and move into "I will manage my own healthcare and healthcare related costs." (the HSA).

I think managed cost healthcare hasn't really worked and consumer directed healthcare will work better, at least somewhat.

That being said, I see the biggest downside of HSA's is the temptation and human nature to not spend your savings. I can picture legions of people with $50,000 in their HSA squawking over an MRI or lab test a doctor wants to order because they'd have to dip into their savings.

[disneysteve]

Originally Posted by Scanner

I think managed cost healthcare hasn't really worked and consumer directed healthcare will work better, at least somewhat.

That being said, I see the biggest downside of HSA's is the temptation and human nature to not spend your savings.

I agree with both sides of that issue. What we have now isn't working because the patient is too far removed from the cost and payment but putting the cost directly on the patient doesn't work either. I don't have the magic solution but I do think HSAs are a good step in the right direction. Although some patients may delay care, I think more patients will get the care but be more mindful of the cost. Twisted your knee an hour ago? Perhaps you don't need the MRI quite yet. Wait and see how it feels in a week. If it is better, you've saved yourself $1,000. If it still hurts, get the test. Today, with just a $20 copay, everyone wants the top of the line test for everything whether it is really indicated or not.

[maat55]

I am a big advocate of the HDHP/HSA. Like Scanner, I think it is better for competition and reduces excessive office calls. People do tend to not want to use their HSA's if possible.

I had one before we got on my wifes plan at her work. You can add accident riders very cheaply to limit your out of pocket due to accidents.

My only concern is having to shop every few years to keep lower rates.

[LivingAlmostLarge]

Here's the problem I have with HDHPs. Why should people bother saving? The best case scenario which happens now, and what young people (under 30 usually) figure nothing bad will ever happen. So screw health insurance.

Plus i have no assets. Then when an accident happens and they need care, they expect the government to pick up the bill, which happens.

So the gamble is if I'm healthy, why should I be responsible and save to pay for my healthcare? Why should I be forced to save?

I mean look how great 401k retirement savings has been working out. People haven't been savings, not saying pensions are the answer.

But personal responsibility, which a lot of people on this particular thread are talking about is NOT the norm. Nor is it the way most people feel when they ACTUALLY have to foot the medical bill.

It's what you mouth when you have employed provided or HDHP and nothing bad.

The moment something catastrophic happens and your HDHP individual plan doesn't cover what you think it should, then you realize, gee, it sucks.

Then you say why should I pay? Why don't I take advantage of the systems like everyone else?

Not saying it's right, but it happens.

My BIL went 6 months without health insurance. And MOST of his friends in the US (Below 30, college educated, working) do as well. They figure, just go to ER, then skip out on the bill, screw the hospital.

Turns out it works. Nothing you can say will make them shell out the $100/month HDHP, let alone for their own care.

[zetta]

I wouldn't go for a HSA/HPDP if you're considering having a child in the next year or two -- you won't have time to build up a good savings cushion in the HSA to use for maternity and newborn care. There are about 8-12 preventive prenatal doctor visits. I think a standard delivery costs about $10k, and a c-section about $40k, so you're sure to have to pay your max deductible the year of the birth. Standard preventive pediatric care is about 6-7 visits in the first year, and that's if the kid doesn't get sick at all! Usually an HMO will be pretty good about covering all these preventive costs.

It makes sense to do an HSA/HDPD when you're in your 20's and don't plan on kids for several years, or when your kids are old enough that they only go to the doctor for annual checkup and illness.

[disneysteve]

LAL - Very good post. Unfortunately, you are right. Most of us on this forum are not the norm. We are not typical Americans. We look at the big picture. We take responsibility for our own well being and our own actions. We plan for the future. Because of that, it is often hard for us to understand why everyone doesn't do the same. I've said many times that I can't comprehend why anyone has a balance on their credit card. Why would someone buy something that they know they can't afford? I just don't get it.

Same goes for healthcare. How can someone who can afford coverage go without? How can they be willing to risk their life and the lives of their family by going uninsured? It makes no sense to me.

[LivingAlmostLarge]

Zetta, not to mention any complications, and the insurance company will say it was a pre-existing condition or not covered by typical methods, so you pay for X, Y, or Z above the deductible with an HDHP. This test isn't standard, not covered by our insurance. Insurance companies are out to make money. It's all about risk management.

And maternity is risky with so many unknown complicating factors. Thus why many plans won't cover it unless forced.

And DS, exactly, people here aren't the norm. I would NEVER go without health insurance, but I'm not willing to risk my life. Others don't care. And many are educated.

Read this article how the people now willing to walk away from FORECLOSURES are the RICH and educated. It's a calculated gamble.